Wednesday, February 6, 2019 / by Holly Northup
The new tax law, passed and signed into law at the end of 2017, is one of the most significant overhauls to the tax code since the 1980s. As a homeowner, it is important to be aware of how these changes affect the real estate market – in particular, your personal residence or investment property. Here’s a look at how the new tax reform impacts current and prospective homeowners:
Mortgage Interest Deduction
The limit on deductible mortgage debt is $750,000 for new loans taken out after December 14, 2017, – down from the previous $1 million. While this does not affect current homeowners, it will impact buyers purchasing homes in the future – specifically those purchasing high-end luxury homes.
State and Local Tax Deductions
The cap on state and local deductions for income and property tax is now $10,000 for single and married filings. Previously, this deduction had no cap.
The new bill retains the current capital gains law of $250,000, single, and $500,000, married. The only aspect that has changed is how long you must reside in the residence to qualify – instead of two out of the past five years, it is now five of the past eight years.
The standard deduction – the amount you can subtract from your income before calculating taxes if you are not itemizing your return - has increased to $12,000, single and $24,000, married. As this deduction has doubled, many homeowners believe it no longer makes sense to itemize.
The new law repeals moving expense deduction and exclusion – except for members of the military.
Casualty Loss Deduction
The new law only allows you to deduct losses attributable to a presidentially-declared disaster.
Despite all of these changes, homeownership remains beneficial.
Reach out if you have questions about buying or selling a home in the Austin area.